Supplier Roles Examples
What do these developments tell us about supplier roles?
Big package express customers were beginning to consolidate services with one primary supplier in the mid 1980s. For example, IBM signed a contract with its number one supplier, Airborne Freight, dropping two other suppliers. Airborne ranked third in its industry at the time. (Year 1980s -SIC 4513)
Explanation: IBM is a Very Large customer, yet it was willing to have only one supplier in its relationship, not several. The implication is that a Very Large customer did not need another supplier for backup supply, price information, or price leverage. Nor did it need more than one supplier to reach all the locations the company needed.
In effect, this tells us that at least the top three competitors in the industry, including FedEx, UPS and Airborne, were able to supply equivalent service and reliability of service at that time. Yet Airborne won the sale.
It almost certainly offered a discount in order to get this consolidated business. In order for this discount to succeed, either the other competitors in the industry must have been unwilling to match the discount or the industry had not yet developed "last look."
In the early 1990s, TRW was struggling with management changes and product reliability problems. As a result, one of its main customers, Ford, changed its exclusive contract with TRW to bring in other suppliers. (Year 1990s – SIC 3465)
Explanation: It appears that the automobile manufacturers are able to rely on only one supplier for many of their sub-assemblies. However, TRW had become so unreliable that Ford introduced another supplier to act as back-up supply and quality control on TRW. Since Ford normally prefers to have only one supplier, TRW is in very dangerous situation if the new supplier is able to offer all that Ford would need from its Primary Supplier.
In the early l990s, Best Buy carried about the same number of items as competitors carried, but it had only half the number of suppliers. Best Buy kept its number of suppliers low in order to keep costs low. (Year 1990s – SIC 5731)
Explanation: Best Buy concluded that the advantages of using several suppliers of a product, in better service or lower prices, had less value to the company than the cost savings from keeping the number of suppliers low. Since Best Buy was very successful in this period of time, the company's policies may be precursors to similar trends among the other companies that compete with Best Buy.
During the 1980s, major distillers started acquiring liquor interests to broaden their product offerings. They needed these offerings to appeal to retailers with a broad product line. (Year 1980s -SIC 2085)
Explanation: The retail liquor industry had evolved, by this time, to the point where the retailers realized substantial savings in dealing with fewer suppliers. Some large distillers carried enough product offerings that these retailers no longer needed some of the smaller distillers for special products. In turn, any larger distiller who wanted to serve the larger retailers would have to offer a very broad range of product offerings in order to succeed.
Guinness is the Primary Supplier to all Irish pubs and is often the exclusive supplier in the relationship. Beamish gained share against Guinness with a 10% discount offer. Beamish doubled its share with that offer, from 3% of the market to 6%. (Year 1993 – SIC 2082)
Explanation: Beamish established a Secondary Supplier role by offering a lower price. Guinness did not match that price, or otherwise, Beamish would not have been able to establish the role. Now, the customers of Beamish use it either for price information or price leverage in a Secondary Supplier role.
Microsoft got customers to consolidate software purchases by using a bundling approach. It bundled spreadsheets, graphics, email, and word processing programs into Microsoft Office and displaced several other suppliers in the early 1990s. By 1992, Microsoft had 72% of the spreadsheet market, 44% of word processing, and 16% of the presentation graphics market. Software developers then increasingly wrote their programs for the Windows format programs first. (Year 1990s -SIC 7372)
Explanation: Microsoft replaced other suppliers by fulfilling two of the Secondary or Tertiary Supplier roles. First, it offered, in one-stop shopping, all the products a customer might need and integrated the products for the customer. Second, it removed the need for price leverage by bundling the products together into one low-cost package. Competitors who would be Primary Suppliers could match neither the integrated package nor the price, so they lost their roles in the customers relationship.
By the early 1990s, all 1700 Walgreen's stores were connected by satellite in order to handle prescriptions faster and more efficiently. A customer could fill a prescription in any city because each Walgreen pharmacy had access to all the customer's pertinent information. (Year 1990s -SIC 5912)
Explanation: For the customer segment that traveled, Walgreen's offer the advantage of one-stop-shopping. The customer no longer needed other pharmacies to serve as backup supply when the customer was on the road.
In 1990, MCI had 12% of the long distance market. Its sales force continued pushing customers to use it as a Secondary Supplier. (Year 1990 -SIC 4813)
Explanation: MCI established a Secondary role position with some of its early customers by filling the role of price leverage for the customer. This was its main marketing thrust since, at the time, it had advantages in Function, Reliability, or Convenience.
In the early 1990s, Baxter International often became a hospital's sole supplier due to the company's ValueLink program. The program tracked and controlled inventory for customers. (Year 1990s -SIC 3841)
Explanation: Baxter International introduced a new service that had a value for customers greater than any benefit its customers were getting from Secondary Role Suppliers, such as backup supply or price information. Baxter offered not only one-stop-shopping, but also an additional benefit that reduced the cost for its customers. This cost reduction was greater than the customers would realize with a Secondary Supplier offering backup supply or price information.
In the mid-1990s, Motorola told retailers of its products that at least three-quarters of the cellular phones in their stores must be made by Motorola. If the retailer failed to meet that quota, it did not get new products. Some retailers dropped Motorola in response. (Year mid 1990s -SIC 3669)
Explanation: The Motorola brand name and service were not sufficient to maintain more than 75% of some retailers' store sales. The demand by Motorola caused these retailers to discontinue Motorola entirely. Other retailers could meet this requirement and left Motorola as their Primary Supplier.